Auto supplier concerns linger after UAW strike

The losses will compound challenges for an already distressed supply chain as it copes with declining U.S. vehicle sales, Mike Wall, auto analyst at IHS Markit, told Automotive News.
Suppliers will be rebuilding into 2020 to make up some of the lost volume and offset the negative impact of the strike, Wall said. But he added: “There’s going to be some amount that doesn’t get made up.

“You’d be hard-pressed to find a supplier that wasn’t touched in some way, shape or form,” he said.

Daron Gifford, a partner with consulting firm Plante Moran, said the short-term challenges suppliers are facing as a result of the strike mirror longer-term issues the industry faces moving forward.

“For the most part, the suppliers can retrench and come back,” Gifford said. But longer term, he predicted, suppliers might decide to decrease the GM portion of their product mix.

The real challenge for suppliers is that the financial hit occurs as they are being expected to plow more money into new technologies and new roles.

As automakers attempt to reposition themselves as technology companies and make plans to outsource production to focus on higher-volume activities internally, suppliers are struggling to retain talent and capital, Gifford said.

“I think you’ll see more and more of the suppliers taking on more and more responsibility from the OEMs.”

Ray Telang, head of the auto practice at PwC, said he expects the GM strike to serve as a harbinger of tougher months ahead for suppliers. “They’re going to have to be nimble enough to address the lower volumes and the lower revenue rates,” Telang said.

Gifford said the strike ultimately shows how high risk it is for suppliers to operate amid the industry’s disruption.

IHS Markit’s Wall observed that the global supply chain is navigating challenging times, especially as consumers hesitate in their purchases.

“It’s going to be up to all the automakers and the large Tier 1s to be monitoring the state of their supply chain,” Wall said. “If we can keep a level of health on the consumer side, that certainly would be a positive and that’s really what I think suppliers need to key in on.”

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